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Lead-Time Variability and Inventory Calculator


How do overall vendor lead-times and especially lead-time variability impact the amount of inventory a retailer needs to hold?.


That is a question we have been looking at here at SCDigest for more than a year, one of the results of that effort being a new on-line calculator that lets retailers and consumer goods companies estimate the impact. You will find it below.


By entering a few brief pieces of data relative to a specific SKU, a product category, a given vendor, the calculator will show you the level by which you could reduce inventories - by making the appropriate safety stock policy adjustments - as a result of lowering vendor lead-time variability by anywhere from 10 to 50%. These calculations are made using well-known, standard mathematics for determining inventory levels based on service level goals. You can also test the potential effect of reducing average lead times by adjusting that data in the calculator and doing several runs.


Can such reductions in vendor lead time variability and average lead times really be achieved? Absolutely - one of the sponsors of  this tool - Compliance Networks - has a proven track record of generating significant improvements in both these measures from its compliance and vendor management applications.


In addition, Retalon, a provider of retail planning and merchandising solutions using advanced analytics, did the actual technical development of the calculator tool itself.


We expect to have a companion tool that will provide the same type of calculations based on improving vendor order fill rates before the end of Q2.


We would welcome your feedback on the calculator. Have some fun with it!